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2020 finally brings short uptick for thermal coal

Given the choice of what to hear first, good news or bad news, Powder River Basin coal producers and the thousands of people who work the mines are used to asking for the good news only to be told there is none.

Five years of working through a historically swift decline, thermal coal regions like Campbell County and the PRB have settled for most of the mines still operating at any level as the best news they could reasonably hope for.

Now for the first time in nearly six years, when electing to hear the good news first, PRB producers are reporting increased production, lower costs and that the mines are profitable.

News Record File Photo 

A loaded coal train rolls through the west Gillette train station. At coal’s peak about 10 years ago when annual production was more than 400 million tons, as many as 80 fully loaded trains pulled out of the Powder River Basin a day. This year, the basin is on pace to produce about 220 million tons.

Overall, a 6% increase in production for the first half of 2021 for the basin’s 12 Campbell County mines may not seem like much. Going from 101.85 million tons through the first half of 2020 to 107.9 million this year isn’t enough to be considered a trend, jump or leap. But as the nation’s economy continues to emerge from the COVID-19 pandemic that’s lingered for nearly 18 months, it’s a welcome reprieve from the 22.5% decline thermal coal saw last year.

With natural gas prices also rising above $4 and the pandemic rebound, it was expected there would be more of a leveling off for a beleaguered thermal coal industry, said Robert Godby, a leading energy economist and interim dean of the University of Wyoming College of Business.

“This is exactly what we expected,” he said. “As the economy recovers, we knew this was coming. But even (to this level) has kind of surprised us. Originally, we though it might be a one-year jump and then moderate, but now it’s looking like coal could maintain this pump through a good chunk of next year.”

Other experts agree, with the federal Energy Information Association projecting that by the end of the year, coal production will increase by 15% over 2020 levels. That also could result in some idled U.S. coal mines reopening.

That would be good news for the Powder River Basin, which produces 43% of all coal mined in the United States.

It’s not enough to believe coal could rebound to pre-2016 levels, but it is good short-term news for Wyoming and Campbell County, Godby said.

News Record File Photo 

Loaded coal trains move out from Peabody Energy Corp.’s North Antelope Rochelle coal mine south of Gillette.

Leading the way are the two largest and only publicly traded producers in the basin, Peabody Energy Inc. and Arch Natural Resources. Their five mines produced about 70 million tons in the first half of 2021, or about 35% of the basin’s overall production, according to the federal Mine Safety and Health Administration. They also employ 2,383 of the basin’s overall 3,816 coal employees, or 62%.

“Both companies reported their costs went down, their revenues are up, their volume is up and the market looks like it’s going to be strong into the fall and winter,” Godby said. “They have a lot of momentum and it’s likely they can keep going through the fall.”

Also working in the short-term favor of thermal coal is that natural gas prices have remained high enough to entice power companies to resume burning coal, he said. That has led to a draw down of some stockpiles at power plants, which means they may order more coal to replenish those stockpiles.

“This is good news,” Godby said. “It means that, for now in places like Gillette, they’re hiring people back. It’s a bit of a reprieve. Coal is still going to decline, but it’s not going to decline to zero anytime soon.”

He also points out that the bump for coal also is a bump for what’s been a seriously strapped Wyoming state budget, which relies on energy for the bulk of its funding.

While still not out of the woods, “The state budget picture is not nearly as dire as we expected even six months ago,” Godby said.

Perhaps as important as the bottom line showing a little black for a change instead of perpetual red is the impact a couple of positive financial quarters can have for the outlook of Wyoming residents, he said.

A grain of salt

While 2021 may go down as a decent year for coal in the PRB, there’s no question this year isn’t a turnaround or launching point for another run for thermal coal in the United States, Godby said.

Arch and Peabody both had their second quarter earnings call last week, and while the numbers were positive, the long-term message was still clear, with Arch, which continues to hold the line on its intent to get out of mining thermal coal and the Powder River Basin.

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A coal shovel loads a haul truck with coal from a seam at the Cordero Rojo mine south of Gillette.

In fact, it’s openly calling the strategy for its Black Thunder and Coal Creek mines a “cash harvest,” meaning it is making enough money to provide the company some cash and pay for its own reclamation obligations.

“Cash harvesting is an honest way to put it,” Godby said. “Metallurgical coal is basically benefiting the most from the (pandemic economic) recovery and the high value of steel. And on the thermal side, you see international prices being solid.

“Arch is being very clear that this is a short-term phenomenon and they’re more than happy to take the cash.”

On the other side is Peabody, which seems to be riding out Arch’s accelerated efforts to leave the PRB. With Arch out of the way, Peabody would be the only big dog left in the kennel.

“In the PRB, with Black Thunder signaling that it’s willing to back out, it really does suggest that North Antelope Rochelle (Peabody’s flagship mine) may still have some life left to provide cash. NARM is going to be the strongest mine in all that,” Godby said.

Other signs

While this year seems more stable for PRB coal, it may not last much past 2021, according to the Energy Information Administration. Two reports the agency released last week show how coal continues to decline in the overall portfolio of U.S. power generation.

The number of producing mines for all types of coal fell to 551 last year, the lowest number since production peaked in 2008. While the report doesn’t break out how many were thermal mines, most were.

Overall, the 151 shuttered mines last year represent an 18% drop and a large part of an overall 62% decline in coal mines since 2008.

“A comparable drop in producing U.S. coal mines happened in 2016 at 17% when producers faced challenging market conditions that resulted in numerous bankruptcies and industry consolidation,” according to a July 30 EIA report. “The declining number of new mines in recent years reflects reduced investment in the coal industry in the United States, less demand for coal internationally and less demand for coal in the U.S. electric power sector.”

Along the way, renewable sources of energy continue to gain more of a foothold in the U.S. power generation picture. For the first time, renewables moved up the ladder to the No. 2 spot of electricity producing sectors at 21% in 2020, just beating out nuclear at 20%. Now a close No. 4 on the list is coal at 19% last year. Outpacing all at No. 1 is natural gas, which accounts for 40% of the nation’s electricity.

Because of a significant hit to thermal coal from the pandemic, the EIA expects the small rebound in 2021 will put coal back to No. 2 this year, but not by much.

“We expect coal-fired electricity generation to increase in the United States during 2021 as natural gas prices continue to rise and as coal becomes more economically competitive,” according to a July 28 EIA report. “Based on forecasts in our short-term energy outlook, we expect coal-fired electricity generation in all sectors in 2021 to increase 18% in 2021 and 10% in 2022.”

News Record File Photo 

Heavy equipment is seen working around a large open pit at the Eagle Butte coal mine just north of Gillette. Eagle Butte is one of two Powder River Basin mines operated by Eagle Specialty Materials.

More time to plan

In the meantime, the rest of the PRB has a little extra time to plan for when coal begins to decline again, Godby said.

While the EIA reports that 62% of active coal mines since 2008 have closed, the Powder River Basin has been almost immune. So far, the basin has seen only one mine closure, the Decker mine in Montana, which closed in December as part of a bankruptcy by its parent company, Lighthouse Resources.

Arch Resources has its Coal Creek mine on track to be the second PRB mine to be shut down and 80% reclaimed by the end of 2022. Arch also has announced it’s accelerating the closure process of Black Thunder unless a buyer for the mine emerges.

That type of contraction is overdue in the PRB, Godby said, adding that it’s simple math that the same 12 mines can’t afford to keep taking smaller slices of the same pie.

Since 2014 when the PRB mines produced 381.8 million tons of coal, production dropped by 46% by the end of 2020, when 206.9 million tons were mined.

While nobody wants to see mines close, the reality is that contraction will make the mines that are left stronger and more stable even as coal remains an important part of the domestic energy picture, if no longer dominant, Godby said.

“People have been kind of dying for some good news,” he said.

And for now, Wyoming’s coal industry will welcome any good news it can get.

District Court Judge Thomas Rumpke hugs Chaycee Worden, 17, after she completed Juvenile and Family Drug Court last week.

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College Election Q&A: How, if and when an independent Gillette College could bring back sports

Editor’s note: Mark Englert, the former longtime vice president of Gillette College, talks about what it would take to bring back the school’s athletics programs and the value of student life on campus and in the community. This is the fourth of a series of Q&A reports leading up to the Aug. 17 special election for a new community college district around Gillette College.

Q: What would it take to bring athletic programs back to Gillette College, if it were to become an independent district?

A: For one, it’s going to take the will of the administration and the trustees to bring any athletics back. How they would choose to proceed will be the determining factor on whether you reintroduce athletics or not, so it’s tough to say.

It will take time. The first thing they’re going to have to do is make sure they establish the college district and that they have a sound budget to do the academic programming that’s necessary, as well as the essential staff that’s necessary, in place.

Then you start looking at other ways to provide access to students. Whether it be intercollegiate athletics or performing arts. You have to develop a whole series of activities around student life and student leadership, which is another access point for students.

Q: Hypothetically, were the elected board to decide to bring back sports ASAP, what would the timeline look like and what are the steps to go from not having an athletics program to having sports?

A: If trustees and administration choose to bring back intercollegiate athletics, you have to provide a recruiting cycle for your coaches. The first thing you’re going to do is a national search for coaches in whatever the sport may be, in such a manner that you bring them on when a recruiting cycle and a scheduling cycle is beginning for the next season.

For example, if it’s men’s and women’s basketball, you would want your coaches brought on by the spring semester so they could recruit through the spring to field a team of athletes and get on everybody’s schedule throughout the region.

You also have to go through a process of getting your membership of what would be, for Gillette College, Region IX in the National Junior College Athletic Association and make sure that the region understands that you’ve chosen to bring athletics back. That way teams can start to schedule and understand that you will participate in post-season tournaments.

Q: Roughly how long could that take?

A: First, many people want to make this a referendum on athletics, and it’s not. It’s about decision-making for the college. So, if or when the administration and the trustees would choose to introduce intercollegiate athletics, or other extracurricular things into the college — which personally, I think are very important — if or when they would do that, you’re looking at six months to a year to really have things up and running.

Hypothetically, say you bring back intercollegiate soccer. And you know that soccer at the collegiate level is a fall sport. So, you’re going to make sure that you have your coaches and you’ve gone through the approval process with the region in that spring semester so they have the spring before that fall season and the summer to recruit student athletes, to make sure that they have a full schedule and that you’ve gone through your approval processes in the region, which would occur in the spring as well.

Q: What is your response to those who say the election and push for independence is just about sports?

A: From the beginning of the effort, this initiative to become an independent college is about decision-making. The decisions that are made relative to Gillette College should happen locally. It happens to be that during the budgeting cycle with the district, the elimination of athletics occurred and that was a catalyst to get things going. But it’s not the elimination of the athletic programs that was really the driver, it was how the decision was made. For all we know, the existing leadership and the board of trustees in Campbell County may have come to the same conclusion, we don’t know. But unless you have the ability locally to work the problems, work the challenges that you have and make the appropriate decisions, then decisions are being made for you, and that’s what we’re trying to avoid.

Q: If an athletic program were to return to Gillette College, what might be the cost?

A: The cost you have with athletics are hiring your staff and full-time head coaches who are paid like faculty members, by and large. It’s not like you would see at a major university, where the head football or head basketball coaches make more than the president. The athletic coaches at a community college are very much like faculty. They’re teaching, they just utilize their sport as their vehicle to teach.

Then there’s the operating dollars to travel and also the scholarship dollars. There’s an assumption that everybody gets a full ride and that’s not the case. Coaches would have a budget and they distribute that how they see fit, not necessarily everyone getting a full ride. Then you also have a local booster club, which Campbell County, Gillette College has a great booster club. One of the strongest in the state. And that means you have significant private dollars supporting your intercollegiate athletic programs.

But to give you a number, I would probably be erroneous in throwing numbers out there because I haven’t looked at that stuff in a while.

Q: What does it take from a recovery standpoint for rebuilding the program and starting from scratch, as opposed to building on what would have been an existing program?

A: Once upon a time, earlier in my career, I was the head women’s coach at Sheridan College. The beauty and the challenge of being a community college head coach is that you are turning over your team every year. That’s a challenge. You’re basically in a rebuilding mode all the time, so you’re nonstop recruiting. Quite honestly, if or when the administration and trustees opted to introduce athletics, depending on the coaching staff that you put together and the time you allow them to recruit, you would come in being extremely competitive right off the bat, because everyone is recruiting all the time anyways.

The one challenge you have to overcome is the fact that we had athletics then they went away for a while. By and large, student athletes don’t look at it from that perspective, they look at the relationship they develop with the coach who might be recruiting him or her and look at community support and the types of facilities you have, and that’s how they make their decision.

Q: How do you go about building, or rebuilding, trust with student athletes and coaches who may have been burned when the programs were cut, or are aware of how abruptly the program ended last time around?

A: That is really dependent on your hiring practices. Whatever team of people would be responsible for hiring the new coaches have a huge responsibility in being judicious about the individual they bring in to be the head coach, whatever the sport or activity may be. Because that individual has to be able to develop strong relationships almost immediately.

Honestly, the coaches or directors that they might bring in already have a network. They already have a network of colleagues out there who they have to provide information about potential student athletes. Then it’s about selling the program, selling the college and making sure that you’re trustworthy. That’s part of the hiring process. I guess that part of it wouldn’t concern me that much, if you hire good people.

Q: Beyond just wins and losses, what value does a Gillette College athletics program bring to the community and campus?

A: I’m an advocate of athletics. I’m an advocate of student life on a campus. And what you try to do at a community college or university or wherever it might be — you build the college campus into a community within the community you reside. So, athletics or the Energy City Voices or student government, all of those are part of the very important fiber of the community college, the community within the community.

If people go back and look, historically, at what our intercollegiate athletes have done, such as visiting elementary schools throughout the community and reading to elementary students, or during youth camps — it’s a pretty incredible connection with our citizenry. I just think that’s extremely valuable. From my perspective, as a former community college employee and CEO, what you do at your community college is you create an array of programs — whether it be academic, student life oriented, performing arts, intercollegiate athletics — that provide access points for students to enter and have a pathway to a degree. They might utilize other talents, singing, theater or athletic prowess to do that. I think that’s so valuable.

Athletics and extracurricular activities, the programs that you have at a college are supported by creating a diverse population. Part of what you do in your community within the community is create diversity and understanding of differing world views. That’s part of what you do. Teaching students to think for themselves and understanding, with greater depth and breadth, world views.